1099-R Code 1 CARES ACT withdrawal

[FourDurands]

We took a CARES Act withdrawal in July and I received my 1099-R yesterday from TIAA but on the form its coded in box 7 with code 1 rather than code 2. I contacted the company to ask them to change it to a code 2 (because someone I chatted with yesterday via TurboTax said it should be) but they will not change it. Am I going to be taxed differently because of this code? TIAA said for the CARES withdrawals you can use either code but they couldn't say if I would be taxed differently because they are not tax professionals. I'm hoping someone here might know what I need to do to be sure I'm not penalized with more taxes on the withdrawal. Thank you in advance! 

[MinhT1]

The Coronavirus-related relief measures for retirement plan distributions have to be reported on form 8915-E which has not yet been finalized by the IRS. No date has been given by the IRS for the finalization of this document.

TurboTax will update this section after the IRS releases the final version of form 8915-E and its instructions. Please revisit this section at a later date.

[FourDurands]

Thanks, I realize that I will need to use this form. My question is, will there be a different tax because of code 1 or code 2 on the 1099-r? Can you not answer this because this 8915-E form has not been approved yet? 

[MinhT1 · Accepted solution]

Form 8915-E and its instructions will give guidance to how you should report your 1099-R to exempt your distribution from the 10% penalty.

[FourDurands]

Thanks so much for your help! I'll wait for the form 🙂 

[dmertz · Accepted solution]

Code 1 is the correct code for the payer to have used.  That this was a coronavirus-related distribution is indicated by how you report it on your tax return.  It is not to be indicated in any way by the payer.

[FourDurands]

Thank you so much!!!! 

[Foxtrot860]

I am doing my taxes and can not find the 8915-E form.  When is this going to be finalized?  A friend of mine is using a different tax program and their SW was just updated with the 8915-E form.

[DoninGA]

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@Foxtrot860 wrote:

I am doing my taxes and can not find the 8915-E form.  When is this going to be finalized?  A friend of mine is using a different tax program and their SW was just updated with the 8915-E form.

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Form 8915-E, Qualified 2020 Disaster Retirement Plan Distributions and Repayments is scheduled to be available in TurboTax on 02/25/2021

Go to this website for IRS forms availability in TurboTax - https://care-cdn.prodsupportsite.a.intuit.com/forms-availability/turbotax_fed_online_individual.html

[Foxtrot860]

Thanks, I will update tomorrow!

[zennie923]

in 1099-r code is 1.  will i have report all the amount in tax return

[DawnC]

Yes, but if it was covid-related, you will be able to waive the penalty and spread the tax over three years.  You can use the 8915-E to apply the relief whether it says 1 or 2 in Box 7 of your 1099-R.   Those who qualify as individuals directly impacted by the pandemic will be able to withdraw up to $100k from their retirement accounts without facing the 10% early withdrawal penalty.   You qualify if:

• You, your spouse, or your dependent are diagnosed with COVID-19
• You experience adverse financial consequences as a result of being quarantined, furloughed, or laid off
• You had work hours reduced to COVID-19
• You’re unable to work due to child care closure or hour reduction

The distribution would be taxed over 2020, 2021, and 2022. You’ll have that time to pay back the funds you withdrew, without the amount impacting that year’s cap on contributions, and if you pay back the amount within that time, you’ll be able to claim a refund on those taxes.    @zennie923

[callied75]

Did you get a final answer on this?  I am going through the same thing.  The company I used said they will not change it and I am worried of the HUGE tax difference that was shown to me by my accountant.  Like thousands of dollars difference.  I also don't want to set myself up for an audit in the future.  Any help or comments are appreciated.

[CatinaT1]

The code 1 in box 7 is okay.  If your withdrawal is eligible for covid relief, this is reported on form 8915-E.  TurboTax asks if you have any exception that applies.  When you say yes, you will get the option to add the exception to the penalty and the option to spread the withdrawal over 3 years. 

[FourDurands]

Yes, Code 1 ended up being fine. I was very thankful as the company would not change the number. I was able to use the chat function within TurboTax to make sure I was entering the info correctly on Form 8915-E. It was super easy once that form was added to my taxes. Good luck!